SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended October 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to .
Commission file Number 2-31520
KIT MANUFACTURING COMPANY
(Exact name of registrant as specified in its charter)
California 95-1525261
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
530 East Wardlow Road, Long Beach, California 90807
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (562) 595-7451
Securities registered pursuant to Section 12(b) of the Act:
Title of class: Common Stock, no par value
Name of each exchange on which registered: American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ ]
The approximate aggregate market value of voting stock held by
non-affiliates of Registrant was $4,469,930 as of January 16, 1998.
1,110,934
(Number of shares of Common Stock outstanding as of January 16, 1998)
Certain information called for by Parts I, II and IV is incorporated by
reference to the registrant's Annual Report to shareholders for the fiscal
year ended October 31, 1997 and the information called for by Part III is
incorporated by reference to the registrant's definitive proxy statement to
be filed with the Commission within 120 days after October 31, 1997.
The Index to Exhibits appears on page 16.
33 pages in total.
<PAGE>1
PART I
Item 1. Business
General
KIT Manufacturing Company ("Registrant") was incorporated
in California in 1947, as the successor to a business founded in
1945. A description of Registrant's business during the last fiscal
year appears on page 2 of Registrant's Annual Report to Shareholders
for the fiscal year ended October 31, 1997, which is incorporated
herein by reference.
Principal Products Produced and Industry Segments
Registrant designs, manufactures and sells manufactured
housing (mobile homes) which are relocatable, factory-built
dwellings of single and double unit design. Constructed on wheel
undercarriages, they are towed by truck to locations where they are
set up and connected to utilities. Registrant also produces
recreational vehicles designed as short-period accommodations for
vacationers and travelers. These products are travel trailers
designed to be towed behind pickup trucks and fifth wheel travel
trailers designed to be towed behind and attached to special
couplers in the beds of pickup trucks.
Set forth below are the percentages of revenues
contributed by each class of similar products for the last three
fiscal years:
Products Class
Fiscal Year Manufactured Recreational
Ended October 31, Housing Vehicles
1995 27% 73%
1996 22% 78%
1997 31% 69%
Certain information regarding industry segments is set
forth on page 10 of Registrant's Annual Report to Shareholders for
the fiscal year ended October 31, 1997, which is incorporated herein
by reference.
Method of Product Distribution
Registrant sells its products to approximately 219 dealers
in 35 states, 33 dealers in Canada and 1 dealer in Japan. Exclusive
dealerships are not the pattern of the industry, and virtually all
dealers also sell competing products. Registrant generally produces
manufactured housing products only against orders received from
dealers. Recreational vehicles are built for inventory particularly
during the winter months in anticipation of increased demand during
the spring months. (See "Seasonal Considerations" below.)
Transportation charges are an important
<PAGE>2
Item 1. Continued
factor in the cost of Registrant's products; therefore, distribution
is generally a function of distance to the various markets and
competitive conditions within these markets. (See Item 2,
"Properties," for the locations of Registrant's principal plants.)
Registrant is not dependent upon a single customer or a
few customers and no dealer or group of dealers accounts for a
substantial amount of Registrant's total sales.
Competitive Conditions
The recreational vehicle and manufactured housing
industries are highly competitive. Registrant believes that the
principal methods of competition in these industries are based upon
quality, price, styling, warranty and service of products being
offered. Registrant also believes that it competes favorably with
respect to these factors in the manufactured housing group and has
recently taken action with respect to the recreational vehicle
product line to ensure it remains competitive in the marketplace.
There are a large number of firms manufacturing and marketing
products similar to those of Registrant within the geographical area
in which Registrant's products are marketed. Several of the
manufacturers within these industries are larger than Registrant in
terms of total revenue and resources.
Backlog
Registrant does not consider the existence and level of
backlog at any given date to be a significant factor affecting its
business, except in establishing its production schedules. This is
primarily due to the fact that orders may be cancelled up until the
time the dealer takes delivery, although such cancellations have not
been significant to date. The dollar amount of backlog, subject to
the above described cancellation provision, was $8,303,771 and
$8,247,330 at October 31, 1997 and 1996, respectively. All of the
backlog existing at October 31, 1997 is expected to be filled within
the current fiscal year.
Sources and Availability of Raw Materials
Registrant purchases raw materials and components from a
number of alternative sources and is not dependent upon any
particular supplier.
Patents
Although Registrant's products are marketed under various
trade names, Registrant does not believe that patents, trademarks,
licenses, franchises and concessions are of material importance to
its business.
3
<PAGE>
Item 1. Continued
Research and Development
Registrant periodically revises and redesigns its models
in response to consumer demand. These revisions and redesigns can
be extensive, if necessary, in order to obtain market acceptance.
Registrant manufactures and sells manufactured housing and
recreational vehicles only and does not engage in new product
development.
Number of Employees
On October 31, 1997, Registrant had 726 employees at its
manufacturing plants and executive offices.
Seasonal Considerations
Registrant's sales and production volume traditionally
increase during the second and third quarters of the fiscal year.
During fiscal 1997, fifty-seven percent of sales were achieved
during the second and third fiscal quarters.
Government Regulation
The manufacture and distribution of Registrant's
manufactured housing and recreational vehicle products are subject
to governmental regulation in the United States and Canada at the
federal, state, provincial and local levels. Compliance with those
governmental regulations, including provisions regulating the
discharge of materials into the environment or otherwise relating to
the protection of the environment, is not expected to have a
material adverse effect on Registrant.
Business Risks
Demand for Registrant's products is dependent upon
the availability and cost of gasoline, weather conditions, available
consumer credit and economic conditions. Relaxed consumer credit
and the up-beat economy favorably affected dealers and retail
purchasers of Registrant's manufactured housing products in fiscal
1997. However, unfavorable spring and early summer weather
conditions coupled with higher than normal pricing pressures
depressed recreational vehicle sales as compared to fiscal 1996.
Nevertheless, KIT's 1998 recreational vehicles models were well
received by the dealers and KIT is optimistic about the favorable
outcome of future operations of this segment.
4
<PAGE>
Item 1. Continued
Working Capital
Accounts receivable balances fluctuate generally with the
timing of shipments during the month since the majority of sales are
either on C.O.D. terms or are financed by dealers through flooring
arrangements with financial institutions. Recreational vehicle
finished goods inventory balances are subject to seasonal
variations. (See "Method of Product Distribution" and "Seasonal
Considerations" above.) A short delivery lead time exists for the
majority of recreational vehicle and manufactured housing raw
material purchases, thereby allowing Registrant to maintain low
levels of raw materials inventory. Registrant is a party to an
unsecured revolving credit agreement with a bank that provides
financing of seasonal working capital requirements.
5
<PAGE>
Item 2. Properties
Registrant leases general executive and administrative
offices in Long Beach, California. The lease expires on March 14,
1997. Registrant owns an 11,160 square foot building, situated on
1.2 acres, housing operational offices in Caldwell, Idaho. The
following table sets forth certain information about the property
and facilities utilized by Registrant for manufacturing and plant
administrative purposes, and the property leased to others (all
property is owned by Registrant unless otherwise noted):
<TABLE>
<CAPTION>
Approximate Approximate
Facility And Location Acres Square Feet
Recreational vehicle plants:
<S> <C> <C>
Caldwell, Idaho (R2) 15.7 55,200
Caldwell, Idaho (R1) 15.8 53,000
Caldwell, Idaho (RSA) 10.9 67,800 (1)
Caldwell, Idaho (Chassis) .5 9,000
McPherson, Kansas 23.0 47,400
McPherson, Kansas 12.5 67,600
Chino, California 10.0 47,700 (2)
Manufactured housing plants:
Caldwell, Idaho 9.5 99,100 (3)
Caldwell, Idaho 2.1 13,200 (1)
</TABLE>
(1)81,000 square foot Production Facility is being utilized by
recreational vehicles and by manufactured housing.
(2)Production Facility is leased to third party.
(3)In 1997, 6,600 square foot storage area was added and 28,500
square foot building addition was also added to the existing
64,000 square foot Production Facility.
6
<PAGE>
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
7
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
Information in response to this item is incorporated by
reference from the information appearing in Registrant's Annual
Report to Shareholders for the fiscal year ended October 31, 1997,
at pages 1 and 12.
Item 6. Selected Financial Data
Information in response to this item is incorporated by
reference from the information appearing in Registrant's Annual
Report to Shareholders for the fiscal year ended October 31, 1997,
at page 11.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Information in response to this item is incorporated by
reference from the information appearing in Registrant's Annual
Report to Shareholders for the fiscal year ended October 31, 1997,
at page 3.
Item 8. Financial Statements and Supplementary Data
Information in response to this item is incorporated by
reference from the Financial Statements and the Notes to Financial
Statements in Registrant's Annual Report to Shareholders for the
fiscal year ended October 31, 1997, at pages 4 through 9 and pages
12 through 14 of this Form 10-K.
Item 9. Disagreements on Accounting and Financial Disclosure
Not applicable.
8
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to this item is incorporated by
reference from Registrant's definitive Proxy Statement to be filed
with the Commission within 120 days after the close of Registrant's
fiscal year.
Item 11. Executive Compensation
Information with respect to this item is incorporated by
reference from Registrant's definitive Proxy Statement to be filed
with the Commission within 120 days after the close of Registrant's
fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information with respect to this item is incorporated by
reference from Registrant's definitive Proxy Statement to be filed
with the Commission within 120 days after the close of Registrant's
fiscal year.
Item 13. Certain Relationships and Related Transactions
Information with respect to this item is incorporated by
reference from Registrant's definitive Proxy Statement to be filed
with the Commission within 120 days after the close of Registrant's
fiscal year.
9
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) (1) Financial Statements
Annual Report
Page(s)
Balance Sheets at October 31, 1997 and
1996 4
Statements of Income for each of the three
years in the period ended October 31, 1997 5
Statements of Shareholders' Equity for each
of the three years in the period ended
October 31, 1997 5
Statements of Cash Flows for each of
the three years in the period ended
October 31, 1997 6
Notes To Financial Statements 7-9
Report of Independent Accountants 9
The financial statements and the Report of Independent
Accountants listed in the above index which are included in
Registrant's Annual Report to Shareholders for the fiscal year ended
October 31, 1997 are hereby incorporated by reference. With the
exception of the items referred to above and in Items 1, 5, 6, 7 and
8, Registrant's Annual Report to Shareholders for the fiscal year
ended October 31, 1997 is not to be deemed filed as part of this
report.
10
<PAGE>
Item 14. Continued
(a) (2) Financial Statement Schedules
FORM
10-K
PAGE
Report of Independent Accountants on
Schedules 12
Schedules:
For each of the three years in the
period ended October 31, 1997
VIII Valuation and Qualifying
Accounts 13
IX Short-Term Borrowings 14
Schedules other than those listed above are omitted for
the reason that they are not required or are not applicable, or the
required information is shown in the financial statements or notes
thereto. Columns omitted from schedules filed have been omitted
because the information is not applicable.
(a) (3) Exhibits
(3) Articles of Incorporation and By-Laws adopted by
Registrant.
(10) Material Contracts.
(A) 1. Incentive Bonus Plan.
(13) Annual report to security holders.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal
quarter ended October 31, 1997.
11
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON SCHEDULES
To the Shareholders and Board of Directors
of KIT Manufacturing Company
Our report on the financial statements of KIT
Manufacturing Company has been incorporated by reference in this
Form 10-K from page 9 of the 1997 Annual Report to Shareholders of
KIT Manufacturing Company. In connection with our audits of such
financial statements, we have also audited the related financial
statement schedules listed in the index on page 11 of this Form
10-K.
In our opinion, the financial statement schedules referred
to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material
respects, the information required to be included therein.
/s/Coopers & Lybrand, L.L.P.
COOPERS & LYBRAND L.L.P.
Los Angeles, California
December 15, 1997
12
<PAGE>
<TABLE>
KIT MANUFACTURING COMPANY
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended October 31, 1997, 1996 And 1995
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
Additions
(1) (2)
Charged To Charged To
Balance At Costs Other Balance At
Beginning Of And Accounts - Deductions - End Of
Description Period Expenses Describe Describe Period
Allowance for doubtful accounts:
<S> <C> <C> <C> <C>
Year ended October 31, 1995 $44,000 - - $44,000
Year ended October 31, 1996 $44,000 - $1,000(A) $43,000
Year ended October 31, 1997 $43,000 - $1,000(A) $42,000
</TABLE>
13
<PAGE>
<TABLE>
KIT MANUFACTURING COMPANY
SCHEDULE IX
SHORT-TERM BORROWINGS
For The Years Ended October 31, 1997, 1996 And 1995
<CAPTION>
Col.A Col.B Col.C Col.D Col.E Col.F
Balance At Maximum Amount Weighted Average Weighted Average
Category Of Aggregate End Of Weighted Average Outstanding Outstanding Interest Rate
Borrowings Period Interest Rate During The Period(B) During The Period(C) During The Period(C)
Year ended October 31, 1995:
<S> <C> <C> <C> <C> <C>
Unsecured revolving
credit agreement (A) -0- * $1,300,000 $722,000 8.8%
Year ended October 31, 1996:
Unsecured revolving
credit agreement (A) -0- * $1,600,000 $697,000 8.0%
Year ended October 31, 1997:
Unsecured revolving
credit agreement (A) -0- * $5,500,000 $1,600,000 8.5%
(A)The Registrant is party to an unsecured revolving
credit agreement with a bank that provides financing
of seasonal working capital requirements. There are
no compensating balance requirements under the
agreement. Major provisions of the agreement include
interest at the bank's prime rate and certain minimum
requirements as to the Registrant's working capital
and debt to equity relationships. The maximum
borrowing permitted is the lesser of $7,500,000 or
the sum of 80% of eligible trade receivables and 50%
of inventories, less any commercial and standby
letters of credit outstanding up to a maximum of
$1,000,000.
(B)Based on month-end balances.
(C)Based on the daily balances and interest rates
during the year.
*Not applicable.
</TABLE>
14
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KIT Manufacturing Company
By:/s/Dan Pocapalia
Dan Pocapalia
Chairman of the Board,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
/s/Dan Pocapalia Jan.26, 1998 /s/John W.H. Hinrichs Jan.26, 1998
Dan Pocapalia John W.H. Hinrichs
Chairman of the Board, Director
Chief Executive Officer
and President (Principal
Executive Officer)
/s/John F. Zaccaro Jan.26, 1998 /s/Frank S. Chan Jan.26, 1998
John F. Zaccaro Frank S. Chan
Director Director
/s/Bruce K. Skinner Jan.26, 1998 /s/Fred W. Chel Jan.26, 1998
Bruce K. Skinner Fred W. Chel
Vice President - Treasurer Director
(Principal Financial and
Accounting Officer)
15
<PAGE>
INDEX TO EXHIBITS
EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K
Sequential
Page Number
(3) Articles of Incorporation and By-Laws adopted
by Registrant 17
(10) Material Contracts
(A) 1. Incentive Bonus Plan 18
(13) Annual Report to Shareholders *
* Incorporated by reference
16
<PAGE>
(3) Articles of Incorporation and By-Laws
The amended and restated Articles of
Incorporation and By-Laws of the Registrant are hereby
incorporated by reference from the exhibits to Form 10-K
(File No. 2-31520) as filed for the fiscal year ended
October 31, 1987.
17
<PAGE>
(10) Material Contracts
(A) 1. Incentive Bonus Plan
Registrant maintains an Incentive Bonus
Plan under which incentive bonuses may be paid to
key management personnel pursuant to individual
agreements relating to the profitability of the
participant's area of responsibility. The amount
of the bonus paid generally increases as the
profitability of the area of responsibility
increases. Time periods for which performance is
measured include fiscal quarters and in some cases
fiscal years. Payments are typically made within
75 days after the time period for which
performance is measured. The agreements are
reviewed annually and may be terminated at will by
either party.
18
<PAGE>
KIT Manufacturing Company
1997 Annual Report
19
<PAGE>
<TABLE>
KIT Manufacturing Company
Financial Highlights
<CAPTION>
(Dollars in thousands except per share amounts)
1997 1996 1995 1994 1993
Operating Results for the
Year Ended October 31
<S> <C> <C> <C> <C> <C>
Sales $76,465 $97,158 $101,462 $89,722 $59,122
Net (loss) income (2,312) 1,431(1) 1,349(2) 1,891(3) 33
Per share ($2.08) $1.29(1) $1.21(2) $1.61(3) $0.02
Shares outstanding 1,110,934 1,110,934 1,110,934 1,177,283 1,472,389
Working capital $7,215 $9,984 $8,427 $7,622 $10,832
(1) Includes gain on business interruption claim of $373,000, net of related
income taxes, or $0.34 per share.
(2) Includes gain on business interruption claim of $423,000, net of related
income taxes, or $0.38 per share.
(3) Includes gain on involuntary conversion of plant facility and equipment and
business interruption claim $671,000, net of related income taxes, or $0.57 per
share.
</TABLE>
About the Company:
KIT Manufacturing Company produces manufactured
housing and recreational vehicles marketed by an
independent dealer network in 35 states in the West,
Midwest, South and Southeast sectors and Canada and Japan.
KIT homes are permanent living structures that are
built utilizing materials similar to conventional
housing. KIT recreational vehicle products are used
primarily for camping or vacation travel and provide
a variety of living accommodations.
<PAGE>20
To Our Shareholders:
KIT's fiscal year sales for recreational vehicles were very soft due
to the fact that our entry level models were not competitively priced.
Because of this pricing issue, we were not able to meet the market
demand of the first time RV buyers who are extremely price conscious.
The RV pricing situation, along with extreme competitive pressures in our
market segment, resulted in a sales decline of 21 percent during fiscal 1997.
The reduction in RV sales volume couple with increased marketing incentives
and a decrease in sales of higher margin recreational vehicles contributed
to a loss from operations of over $3,700,000.
As a result of the loss from operations, the net financial loss was
$2,312,000, or $2.08 per share, in comparison to net income in fiscal 1996
of $1,431,000, or $1.29 per share. Net income for 1996 included an after-tax
gain from a business interruption claim of $373,000, or $.34 per share. This
gain was the result of an insurance claim arising from the 1992 tornado
destruction of our McPherson, Kansas manufactured housing facility. This
plant was closed in 1992.
Because of the disappointing results from recreational vehicle
operations during fiscal 1997, the Company has made a number of key management
changes to the RV division. In addition to the administrative changes, KIT
has realigned the RV manufacturing facilities for a more competitive
production environment. The purpose of the operational restructuring is to
prepare for growth opportunities presented by the ever changing RV market.
The most recent National RV show in Louisville, Kentucky held during the
latter part of 1997 provided management with an optimistic view of what lies
ahead for fiscal 1998. Our restyled recreational vehicle lines, enhanced by
our new low-end product introduction, were extremely well received by the
dealers. Based on the enthusiastic response, management believes that the
Company is well positioned to meet the demands of this highly competitive
market where the challenge is to provide moderately-priced, high-valued
products.
The manufactured housing division completed its plant expansion during
fiscal 1997, giving this facility a production capacity increase of 40%. The
additional capacity, as well as the progress made through several operational
changes, has positioned this division to take advantage of the expanding
demand for the KIT manufactured home in all of our sales regions.
The Company remains in a strong financial position to take advantage of
anticipated current and future demand. KIT has no long term debt and its
line of credit remains unused at the fiscal year end. In addition, working
capital remained stable in comparison to fiscal 1996 and its current assets
remain at more than double current liabilities.
Fiscal 1998 will see the Company continue to concentrate on providing
existing and new dealers with high quality, high value, innovative products.
First quarter operations will see our normal seasonal slowdown, however,
management believes that the second quarter and balance of the fiscal year
should yield a drastic reduction in the losses incurred in fiscal 1997.
Sincerely,
Dan Pocapalia
Chairman, President and
Chief Executive Officer
<PAGE>21
Recreational Vehicles
KIT is one of the largest manufacturers of towable travel trailers and
fifth-wheels in the United States. KIT's position in the industry is the result
of 53 years of consistently producing and delivering high quality, high value
products to our customers. KIT products are well known for their reliability
and their retained value and at "trade-in" time are in high demand in the
second time buyer market.
The baby-boomer generation along with younger families are discovering the
affordability and comfort of recreational vehicle travel. The Company's
philosophy of uncompromising quality control standards has driven KIT to
new heights in retail customer loyalty from the oldest to the newest members
of RV life-style.
KIT's RV products incorporate high quality, reliable name-brand appliances,
interior components and accessories. In our 1998 product lines, the Company
has introduced many new innovations in our models in response to our
customers' requests. In addition to new interiors, the 1998 floor plans have
been further enhanced. Because of these changes, KIT has been able to
significantly improve its dealer network.
KIT produces a wide range of recreational vehicle products in its
manufacturing facilities in Caldwell, Idaho and McPherson, Kansas. KIT
RV's measure from 19 to 39 feet in length, are more than eight feet wide and
provide sleeping accommodations from 2 to 10 persons.
KIT produces its travel trailers and fifth-wheels under the brand names of
Road Ranger, Companion, Elite, Cordova, Sportsmaster, Sportsmaster
Classic, Patio Hauler, and our newest entry level brands, the Espre' and the
Sun Chaser.
The new entry level Sun Chaser and Espre' brands have been extremely well
received by the dealer body. KIT expects that the retail buyers' enthusiastic
reaction will be to choose those products for the many quality features and
their low price point.
The Road Ranger and Companion lines, with over thirty floor plans, are in
the mid-priced market. These models are configured with a wide range of
features. Road Ranger Elite and Companion Cordova models are our
high-end product offering. These models provide the largest living and
storage areas in their price range. They appeal to the discerning buyer and
offer a vast selection of features as standard equipment. At the low-end of
the mid-priced market, KIT offers the Sportsmaster and Sportsmaster Classic.
The Sportsmaster Classic line will be new for the coming winter and spring
selling seasons.
Designed for adventure, the Patio Hauler features a cargo area for hauling
off-road vehicles and other sporting equipment. The cargo area then converts
to an enclosed patio when the "toys" are removed. The five available floor
plans all feature the patio concept as well as provide the buyer with a fully
appointed living area separate from the patio.
Retail prices for the more than 30 KIT floor plans range from $9,800 to
$52,000. This range covers approximately 80 percent of the travel trailer and
fifth-wheel market.
More than 220 independent dealers now distribute KIT recreational vehicles
to the retail consumer throughout the continental United States, Canada and
Japan. KIT provides its dealer network system with national media
advertising, sales literature, training and special support programs, along
with its national reputation for product quality and service.
RV use is a flourishing source of recreation and relaxation for many
Americans regardless of age or economic background. Over the past 53 years,
KIT has supplied this growing market with the quality and affordability that
fulfills the desires of people who enjoy this type of comfort and convenience.
The Company continues to strive for excellence in its products and service in
its quest to make the RV experience a most enjoyable one for its many
satisfied customers.
Manufactured Housing
The manufactured housing division continues its profitable operations. Value
pricing coupled with a continuing emphasis on reducing operating costs has
had a positive effect on the financial results of the housing products
division.
Manufactured housing builds both single and multi-sectioned dwellings
designed to be transported to a prepared homesite. Multi-sectioned homes
offer the appearance and living space of traditional site-built housing and
have become the dominant portion of our sales. KIT homes are built in a
controlled environment which minimizes the variables inherent in outdoor
construction. By standardizing models we can build homes with greater
efficiency, and consequently at lower cost, than site-built homes with the same
features.
The manufactured housing division continues to aggressively develop new
products that incorporate innovative floor plans, modern colors and
functional design. KIT manufactured homes are distributed from production
facilities in Caldwell, Idaho through a network of approximately 68 dealers
located in 9 Western states.
KIT's homes are marketed in five product lines. The Oakcrest 14' wide home
offers gracious, convenient living in modest floor space. The Royal Oaks
home appeals to buyers with an interest in deluxe entry-level housing. Our
Sierra XL homes are generally larger and provide a wide array of styles and
custom features. The Golden State line, our most elegant series of homes,
provides outstanding value for individuals who place a premium on comfort
and luxury. Introduced in 1994, the Briercrest was designed specifically with
subdivision application in mind as the home is sold with an attached garage
and is basement applicable. Living space in the 52 available floor plans range
from about 530 to more than 2,500 square feet. Retail prices, exclusive of land
costs, range from approximately $20,000 to $120,000.
In fiscal 1997, KIT homes enjoyed a greater share of the single family home
subdivision sites. With an additional 40% production capacity now available,
our future in this market should support KIT's housing division expansion.
As the nation continues to search for solutions to the problem of affordable,
single-family housing, KIT stands ready to provide attractive, energy-efficient
homes at competitive prices.
22
<PAGE>
KIT Manufacturing Company
Management's Discussion And Analysis of Results of Operations and
Financial Condition
Results of Operations
Fiscal 1997 Compared to 1996
Sales declined 21% to $76.5 million compared to fiscal 1996. The net
loss was $2,312,00, or $2.08 per share, in comparison to net income in fiscal
1996 of $1,431,000, or $1.29 per share. The net loss stemmed mainly from
operational losses in the RV division. These losses were the result of a
significant decline in sales due to competitive pricing issues. Net income in
1996 included an after-tax gain from insurance proceeds on a business
interruption claim of $373,000, or $0.34 per share. The manufactured housing
division implemented modest price increases in 1997 and 1996 to counter cost
increases in raw material costs.
Recreational vehicle division sales decreased 30% to $52.7 million. The
overall decrease in RV shipments was 31% down to 3,582 units. This decline
consisted of a decrease of fifth-wheel model shipments from 2,501 units in
1996 to 1,774 units in fiscal 1997 and travel trailer shipments of 1,808 units
down from 2,728 shipped in 1996. The model mix moved toward lower priced
units in fiscal 1997. Because of the results from operations, the Company has
made key management changes and has realigned the RV manufacturing
facilities for a more competitive production environment. Based on these
changes, management believes that the Company is fully prepared to meet
this continuing trend by offering lower priced units in fiscal 1998.
Manufactured housing sales increased 10% to $23.8 million. This increase
reflected a 64% rise in shipments of single-section homes to 97 units and an
8% increase in shipments of multi-section homes to 563 units. Total unit
shipments increased 14% to 660 homes in fiscal 1997.
Gross profit as a percent of sales decreased to 4% in comparison to 11% in
1996. The primary reasons for the decrease were a decrease in operating
efficiencies, lower sales volume and increased material costs.
Selling, general and administrative expenses remained at 9.2% of sales in
comparison to fiscal 1996. The Company increased its selling costs in RV's in
order to maintain market share as competition increased.
Net interest expense of $36,000 in 1997, as compared to net interest expense
of $13,000 in 1996, was the result of higher average borrowing levels as the
Company maintained its inventories at a higher average level than in fiscal
1996.
Fiscal 1996 Compared to 1995
Sales declined 4% to $97.2 million compared to fiscal 1995. Net income
increased to $1,431,000, or $1.29 per share, compared to $1,349,000, or $1.21
per share, in fiscal 1995. Net income in 1996 and 1995 includes an after
tax-gain from insurance proceeds on a business interruption claim of
$373,000, or $.34 per share, and $423,000 or $.38 per share, respectively.
Recreational vehicle division sales increased 2% to $75.6 million. Overall RV
shipments decreased 5% to 5,229 units. Travel trailer shipments declined
15% to 2,728 units. Fifth-wheel model shipments increased to 2,501 units
from 2,320 shipped in 1995.
Manufactured housing sales declined 21% to $21.6 million. Total unit
shipments decreased 26% to 578 homes in fiscal 1996 in comparison to 781
homes shipped in 1995.
Gross profit as a percent of sales increased to 11% in comparison to 9.2% in
1995. The primary reasons for the increase were an increase in operating
efficiencies, sales volume and a decline in start-up costs at the new RV and
manufactured housing facilities
Selling, general and administrative expenses increased 13% to 9.2% of sales
in comparison to fiscal 1995 as the Company increased its RV selling costs in
the face of increased competition.
Net interest income of $13,000 in 1996, as compared to net interest income of
$42,000 in 1995, was the result of higher average borrowing levels than in
1995.
Liquidity and Capital Resources
The financial position of the Company continues to remain strong. The
current ratio at fiscal year 1997 was 2.0 in comparison to 2.1 in fiscal 1996
due to a decrease in receivables, inventories and trade payables.
In addition to funding capital requirements with available funds, the
Company, through financing activities, funds seasonal working capital
requirements with cash from periodic borrowings on its unsecured revolving
line of credit. See Note 4 of the Notes to Financial Statements for
discussion of the line of credit. There were no borrowings against the line of
credit at fiscal year-end 1997 or 1996.
The Company believes that available funds, supplemented as needed with
funds available on its line of credit, will provide it with sufficient
resources to meet present and reasonably foreseeable working capital
requirements and other cash needs.
<PAGE>23
<TABLE>
KIT Manufacturing Company
Balance Sheets
<CAPTION>
October 31, 1997 1996
ASSETS
Current Assets
<S> <C> <C>
Cash and cash investments $3,673,000 $2,281,000
Accounts receivable, net of allowance for doubtful
accounts of $42,000 in 1997 and $43,000 in 1996 4,533,000 8,026,000
Inventories 3,402,000 7,169,000
Prepaids and income taxes receivable and deferred 2,632,000 1,241,000
Total Current Assets 14,240,000 18,717,000
Property, Plant and Equipment, at cost
Land 492,000 492,000
Buildings and improvements 7,047,000 6,856,000
Machinery and equipment 4,148,000 4,233,000
Construction in progress 1,055,000 175,000
12,742,000 11,756,000
Less accumulated depreciation (5,898,000) (5,437,000)
6,844,000 6,319,000
Other Assets 53,000 103,000
$21,137,000 $25,139,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $2,697,000 $3,685,000
Accrued payroll and payroll related liabilities 1,604,000 2,256,000
Accrued marketing programs 809,000 1,104,000
Accrued expenses 1,915,000 1,664,000
Income taxes payable 24,000
Total Current Liabilities 7,025,000 8,733,000
Deferred Income Taxes 1,487,000 1,469,000
8,512,000 10,202,000
Commitments and Contingencies
Shareholders' Equity
Preferred stock, $1 par value; authorized 1,000,000
shares; none issued
Common stock, without par value; authorized 5,000,000
shares; issued and outstanding 1,110,934 shares in
1997 and 1996 750,000 750,000
Additional paid-in capital 842,000 842,000
Retained earnings 11,033,000 13,345,000
Total Shareholders' Equity 12,625,000 14,937,000
$21,137,000 $25,139,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>24
<TABLE>
KIT Manufacturing Company
Statements of Income
<CAPTION>
For the Years Ended October 31, 1997 1996 1995
<S> <C> <C> <C>
Sales $76,465,000 $97,158,000 $101,462,000
Costs and expenses
Cost of sales 73,176,000 86,473,000 92,098,000
Selling, general and admin. expenses 7,074,000 8,911,000 7,872,000
80,250,000 95,384,000 99,970,000
Operating (loss) income (3,785,000) 1,774,000 1,492,000
Other income (expense)
Interest (expense) income, net (36,000) (13,000) 42,000
Gain on business interruption claim 620,000 701,000
(Loss) income before income taxes (3,821,000) 2,381,000 2,235,000
(Benefit) provision for income taxes (1,509,000) 950,000 886,000
Net (loss) income $(2,312,000) $1,431,000 $1,349,000
Net (loss) income per share ($2.08) $1.29 $1.21
Shares outstanding 1,110,934 1,110,934 1,110,934
</TABLE>
<TABLE>
<CAPTION>
Statements of Shareholders' Equity
Common Stock Additional Retained
Shares Amount Paid-In Capital Earnings Total
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1994 1,110,934 $750,000 $842,000 $10,565,000 $12,157,000
Net income 1,349,000 1,349,000
Balance, October 31, 1995 1,110,934 $750,000 $842,000 $11,914,000 $13,506,000
Net income 1,431,000 1,431,000
Balance, October 31, 1996 1,110,934 $750,000 $842,000 $13,345,000 $14,937,000
Net loss (2,312,000) (2,312,000)
Balance, October 31, 1997 1,110,934 $750,000 $842,000 $11,033,000 $12,625,000
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>25
<TABLE>
KIT Manufacturing Company
Statements of Cash Flows
<CAPTION>
For the Years Ended October 31, 1997 1996 1995
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Cash received from customers $79,958,000 $96,711,000 $100,449,000
Life Insurance proceeds 72,000
Interest received 105,000 53,000 87,000
Cash received from operations 80,135,000 96,764,000 100,536,000
Cash paid to suppliers and employees 77,565,000 95,593,000 101,061,000
Interest paid 141,000 66,000 45,000
Income taxes (received) paid (47,000) 1,073,000 908,000
Cash disbursed for operations 77,659,000 96,732,000 102,014,000
Net cash provided by (used in) operating activities 2,476,000 32,000 (1,478,000)
Cash Flows From Investing Activities:
Purchase of property, plant and equipment, net (969,000) (434,000) (1,251,000)
Insurance proceeds from business interruption claim 620,000 701,000
Changes in other current and non-current assets (115,000) (155,000) (379,000)
Net cash (used in) provided by investing activities (1,084,000) 31,000 (929,000)
Cash Flows From Financing Activities:
Proceeds from line-of-credit borrowings 12,374,000 4,900,000 2,800,000
Principal payments on line-of-credit borrowings (12,374,000) (4,900,000) (2,800,000)
Net cash used in financing activities -- -- --
Net increase (decrease) in cash 1,392,000 63,000 (2,407,000)
Cash and cash investments at beginning of year 2,281,000 2,218,000 4,625,000
Cash and cash investments at end of year $3,673,000 $2,281,000 $2,218,000
Reconciliation of Net (Loss) Income to Net Cash Provided by
(Used in) Operating Activities:
Net (loss) income $(2,312,000) $1,431,000 $1,349,000
Adjustments to reconcile net (loss) income to net cash
provided by (used in) operating activities:
Depreciation 677,000 670,000 597,000
Gain on business interruption claim -- (620,000) (701,000)
Decrease (increase) in accounts receivable 3,493,000 (676,000) (1,209,000)
Decrease (increase) in inventories 3,767,000 (1,501,000) (1,575,000)
(Decr.) incr. in accts payable and accruals (1,667,000) 894,000 29,000
(Decrease) increase in income taxes payable (1,482,000) (166,000) 32,000
Net cash provided by (used in) operating activities $2,476,000 $32,000 $(1,478,000)
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>26
KIT Manufacturing Company
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Cash and Cash Investments
The Company places its temporary cash investments, all of which are considered
cash equivalents, in high quality financial instruments. The Company also
maintains deposits at financial institutions in amounts in excess of federally
insured limits. Management believes that credit risk related to its investments
is limited due to the quality of the investments and the Company's policy which
limits credit exposure to any one financial institution.
Valuation of Inventories
Inventories are stated at the lower of cost (last-in, first-out for material and
first-in, first-out for labor and overhead) or market.
Depreciation and Amortization
For financial reporting purposes, depreciation and amortization of property,
plant and equipment is generally provided for on a straight-line basis, using
estimated useful lives of 10 years for land improvements, 20 to 33-1/3 years for
buildings and improvements, 3 to 10 years for equipment and lease terms for
leasehold improvements. Upon sale or disposition of assets, any gain or loss is
included in the statement of income. Expenditures for maintenance, repairs and
minor renewals are charged to expense as incurred; expenditures for
betterments and major renewals are capitalized.
Income Taxes
The Company follows Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes, (SFAS 109), which requires the recognition of
deferred tax liabilities and assets for the expected future tax consequences of
events that have been included in the financial statements or tax returns. Under
this method, deferred tax liabilities and assets are determined based on the
difference between the financial statement and tax basis of assets and
liabilities using enacted rates in effect for the year in which the differences
are expected to reverse. Valuation allowances are established, when necessary,
to reduce deferred tax assets to the amount expected to be realized
Income Per Share
Income per share amounts are based on the weighted average number of common
shares outstanding during the year.
Insurance
The Company is self-insured for workers' compensation for its plant locations,
officers and directors, and product liability. The Company has recognized an
estimated potential liability for incurred but not reported claims. The Company
recognized experience refunds from its medical insurance carrier amounting to
$230,000 in 1996, and $195,000 in 1995.
Estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates.
Stock Options
In October 1995, the Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock Based Compensation
(SFAS 123) which is effective for transactions entered into in fiscal years that
begin after December 15, 1995. The Company has determined that this method
of accounting for stock based compensation has no effect on the financial
statements as presented since the most recent stock option grants occurred in
1994.
2. Business Interruption Claim
In mid-June, 1992, the McPherson, Kansas manufactured housing plant facility
was destroyed by a tornado. In addition, all of the manufacturing equipment
and inventories were lost to water and wind damage. The storm also destroyed
the finished goods inventory of the RV manufacturing plant in the same location.
The Company recorded gains in 1996 and 1995 of $620,000 and $701,000,
respectively, for a business interruption claim relative to this matter.
<PAGE>27
3. Stock Options
During June 1994, the Company granted to five officers of the Company, options
to purchase up to 96,944 shares of the Company's common stock, at 100% of
the then fair value, or $10.38 per share. Also in June 1994, the Company
granted to one such officer an additional option to purchase up to 35,056 shares
of the Company's common stock, at 110% of the then fair value, or $11.41 per
share. Options granted vest in four equal annual installments beginning one
year after the date of the grant. The options to purchase the 96,944 shares of
the Company's common stock remain outstanding (subject to termination of
employment, death or permanent disability of the holder, as set forth in the
option agreements) for a period of 10 years from the date of grant. The option
to purchase the 35,056 additional shares of the Company's common stock
remains outstanding (subject to termination of employment, death or
permanent disability of the holder, as set forth in the option agreements) for a
period of 5 years from the date of grant. On October 31, 1997, 1996, and 1995,
total unexercised options were 132,000, of which 132,000, 66,000 and 33,000
options, respectively, were exercisable.
4. Bank Credit Line
The Company is party to an unsecured revolving credit agreement with a bank
that provides financing of seasonal working capital requirements. There are no
compensating balance requirements under the agreement. Major provisions of
the agreement include interest at the lesser of the bank's prime rate or market
rate, and certain minimum requirements as to the Company's working capital
and debt-to-equity relationships. At October 31, 1997, there was no outstanding
balance on the revolving credit line, and the maximum borrowing permitted
was the lesser of $7,500,000 or the sum of 80% of eligible trade receivables and
50% of inventories, less any commercial and standby letters of credit
outstanding up to a maximum of $1,000,000. Interest costs charged to expense
for the fiscal years 1997, 1996 and 1995 were $141,000, $66,000, and $45,000,
respectively.
5. Commitments and Contingencies
The Company was contingently liable at October 31, 1997 to various financial
institutions on repurchase agreements in connection with wholesale inventory
financing. In general, inventory is repurchased by the Company upon customer
default with a financing institution and then resold through normal distribution
channels. The total value of finished units subject to such agreements as of
October 31, 1997 and 1996 was approximately $12,312,000 and $15,644,000,
respectively.
In addition, the Company is contingently liable to financial institutions for
standby letters of credit totalling $778,000 and $748,000 as of October 31, 1997
and 1996, respectively. These letters of credit were established to satisfy the
self-insured workers' compensation regulations of the states in which the
Company conducts manufacturing operations.
Management does not expect that losses, if any, from the contingencies described
above will be of material importance to the financial condition or earnings of
the Company.
<TABLE>
<CAPTION>
6. Income Taxes
The components of the (benefit) provision for income taxes are as follows:
For the year ended October 31, 1997 1996 1995
Current:
<S> <C> <C> <C>
Federal $(1,263,000) $712,000 $724,000
State (266,000) 195,000 216,000
(1,529,000) 907,000 940,000
</TABLE>
<TABLE>
<CAPTION>
Deferred:
<S> <C> <C> <C>
Federal 54,000 47,000 (19,000)
Stae (34,000) (4,000) (35,000)
20,000 43,000 (54,000)
$(1,509,000) $950,000 $886,000
</TABLE>
<TABLE>
<CAPTION>
The sources of deferred taxes were as follows:
October 31, 1997 1996 1995
<S> <C> <C> <C>
Accrued warranty costs $(160,000) $(52,000) $(59,000)
Workers' compensation reserves (60,000) 31,000 (35,000)
State income and franchise taxes 167,000 7,000 70,000
Inventory cost capitalization 105,000 (16,000) (121,000)
Accelerated depreciation 18,000 70,000 92,000
Product liability reserves and other (50,000) 3,000 (1,000)
$20,000 $43,000 $(54,000)
</TABLE>
<PAGE>28
<TABLE>
KIT Manufacturing Company
Notes to Financial Statements
<CAPTION>
6. Income Taxes Continued
Reconciliation of the effective tax rates and the U.S. statutory tax rate is summarized as follows:
For the year ended October 31, 1997 1996 1995
<S> <C> <C> <C>
Statutory tax rate (34.0%) 34.0% 34.0%
State tax provision, net of federal tax effect (1.8) 4.1 5.3
Tax exempt interest (0.2) (0.3) (0.4)
Other (3.5) 2.1 0.7
(39.5%) 39.9% 39.6%
</TABLE>
<TABLE>
<CAPTION>
The components of the deferred tax asset and liability are as follows :
October 31, 1997 1996
Deferred tax asset:
<S> <C> <C>
Allowance for doubtful accounts $20,000 $20,000
Inventory adjustment 33,000 138,000
Accrued expenses 862,000 592,000
State income taxes (70,000) 97,000
$845,000 $847,000
Deferred tax liability:
Accelerated depreciation $392,000 $374,000
Involuntary conversion of plant facility
and equipment 1,095,000 1,095,000
$1,487,000 $1,469,000
The Company did not record a valuation allowance against the deferred tax
asset in fiscal 1997 or 1996.
</TABLE>
<TABLE>
<CAPTION>
7. Inventories
Inventories are summarized as follows:
October 31, 1997 1996
<S> <C> <C>
Raw material $1,876,000 $3,413,000
Work in process 907,000 1,230,000
Finished goods 619,000 2,526,000
$3,402,000 $7,169,000
The excess of current replacement cost over last-in, first-out cost was
$1,189,000 at October 31, 1997 and $1,234,000 at October 31, 1996.
</TABLE>
8. Industry Segment Information
Information about the Company's operations within industry segments for
the years ended October 31, 1997, 1996, and 1995 is presented on page 10.
Report of Independent Accountants
To the Shareholders and Board of Directors of KIT Manufacturing Company
We have audited the accompanying balance sheets of KIT Manufacturing
Company as of October 31, 1997 and 1996, and the related statements of income,
shareholders' equity, and cash flows for each of the three years in the period
ended October 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of KIT Manufacturing Company as
of October 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended October 31, 1997, in
conformity with generally accepted accounting principles.
Los Angeles, California Coopers & Lybrand, L.L.P.
December 15, 1997
<PAGE>29
<TABLE>
KIT Manufacturing Company
Industry Segment Information
<CAPTION>
October 31, 1997 1996 1995
(Dollars in thousands)
<S> <C> <C> <C>
SALES
Manufactured housing $23,807 $21,580 $27,304
Recreational vehicles 52,658 75,578 74,158
Total sales $76,465 $97,158 $101,462
(LOSS) INCOME BEFORE INCOME TAXES
Operating (loss) income
Manufactured housing $876 $933 $(53)
Recreational vehicles (4,661) 841 1,545
Total operating (loss) income (3,785) 1,774 1,492
Interest (expense) income, net (36) (13) 42
Gain on business interruption claim -- 620 701
(Loss) income before income taxes $(3,821) $2,381 $2,235
IDENTIFIABLE ASSETS
Manufactured housing $8,019 $7,207 $6,447
Recreational vehicles 13,118 17,932 16,855
Total assets $21,137 $25,139 $23,302
DEPRECIATION
Manufactured housing $259 $234 $232
Recreational vehicles 418 436 365
Total depreciation $677 $670 $597
CAPITAL EXPENDITURES
Manufactured housing $872 $127 $253
Recreational vehicles 97 307 998
Total capital expenditures $969 $434 $1,251
Operating (loss) income represents (loss) income before net interest income
(expense), gain on business interruption claim and income taxes. Non-direct
operating expenses are allocated to industry segments based on a percentage of
sales. Identifiable assets, depreciation and capital expenditures are those
items that are used in the operations in each industry segment, with jointly
used items being allocated based on a percentage of sales.
</TABLE>
<PAGE>30
<TABLE>
KIT Manufacturing Company
Selected Financial Data
<CAPTION>
October 31, 1997 1996 1995 1994 1993
(Dollars in thousands
except per share amounts)
FISCAL YEAR
<S> <C> <C> <C> <C> <C>
Sales $76,465 $97,158 $101,462 $87,722 $59,122
Net (loss) income $(2,312) $1,431(1) $1,349(2) $1,891(3) $33
Cash dividends paid $ $ $ $ $
Capital expenditures $969 $434 $1,251 $3,622 $1,804
Depreciation $677 $670 $597 $478 $331
AT YEAR-END
Working capital $7,215 $9,984 $8,427 $7,622 $10,832
Current ratio 2.0:1 2.1:1 2.0:1 1.9:1 2.7:1
Prop., plt. & eqpt., net $6,844 $6,319 $6,388 $5,762 $3,965
Total assets $21,137 $25,139 $23,302 $21,891 $21,308
Long-term obligations $ $ $ $ $
Shareholders' equity $12,625 $14,937 $13,506 $12,157 $13,930
PER SHARE
Net (loss) income $(2.08) $1.29(1) $1.21(2) $1.61(3) $0.02
Shareholders' equity $11.36 $13.45 $12.16 $10.94 $9.46
(1) Includes gain on a business interruption claim of $373,000, net of related income
taxes, or $0.34 per share.
(2) Includes gain on a business interruption claim of $423,000, net of related income
taxes, or $0.38 per share.
(3) Includes gain on involuntary conversion of plant facility and equipment and a
business interruption claim of $671,000, net of related income taxes, or $0.57
per share.
</TABLE>
<PAGE>31
<TABLE>
KIT Manufacturing Company
Quarterly Statistics
(Dollars in thousands except per share amounts)
(Unaudited)
<CAPTION>
Fiscal 1997 First Quarter Second Quarter Third Quarter Fourth Quarter
<S> <C> <C> <C> <C>
Sales $16,589 $23,134 $20,811 $15,931
Gross profit 1,332 1,026 867 64
Loss before income taxes (546) (1,249) (741) (1,285)
Net loss (322) (733) (437) (816)
Net loss per share ($0.29) ($0.66) ($0.39) ($0.74)
Fiscal 1996
<S> <C> <C> <C> <C>
Sales $17,971 $28,679 $23,924 $26,584
Gross profit 1,954 3,450 3,206 2,075
Income before income taxes 11 839 1,415 116
Net income 7 503 826 (1) 95
Net income per share $0.01 $0.45 $0.74 (1) $0.09
(1) Includes gain on a business interruption claim of $373,000, net of
related income taxes, or $0.34 per share.
</TABLE>
<TABLE>
<CAPTION>
Market Prices of Common Stock
Fiscal 1997 First Quarter Second Quarter Third Quarter Fourth Quarter
<S> <C> <C> <C> <C>
High 11 7/8 12 3/8 10 3/4 9 9/16
Low 11 10 1/2 9 1/2 8 1/8
Fiscal 1996
High 14 1/4 16 1/4 15 1/4 13 7/8
Low 11 10 1/4 10 1/8 10 1/4
KIT common stock is traded on the American Stock Exchange. The above table reflects
the high and low sales prices for each quarterly fiscal period in the past two years.
There are approximately 346 shareholders of record on January 9, 1998.
</TABLE>
32
<PAGE>
Corporate Information
Directors Stock Registrar and Transfer Agent
Dan Pocapalia ChaseMellon Shareholder Services, L.L.C.
Chairman of the Board, Ridgefield Park, New Jersey
President and Chief
Executive Officer of KIT
Fred W. Chel Legal Counsel
Business Consultant, O'Melveny & Myers
Custom Fibreglass Los Angeles, California
Manufacturing Company
Frank S. Chan, Jr.
Certified Public Accountant, Partner, Accountants
Frank S. Chan & Company Coopers & Lybrand L.L.P.
Los Angeles, California
John W. H. Hinrichs
Senior Vice President & Cashier,
Farmers & Merchants Bank
of Long Beach Form 10-K
A copy of the Company's current annual
John F.Zaccaro report filed with the Securities and
President and Executive Producer, Exchange Commission (SEC) on Form 10-K,
The International Health and exclusive of exhibits, will be furnished
Medical Film Festival, Inc. to shareholders without charge upon
written request to Marlyce A. Faldetta,
Corporate Secretary, KIT Manufacturing
Officers Company, Post Office Box 848, Long Beach
Dan Pocapalia California 90801.
Chairman of the Board, President
and Chief Executive Officer
Executive Offices
Gerald R. Wannamaker KIT Manufacturing Company
Executive Vice President - Operations 530 East Wardlow Road, P.O. Box 848
Long Beach, California 90801
Bruce K. Skinner (562) 595-7451
Vice President and Treasurer
Matthew S. Pulizzi Annual Meeting of Shareholders
Vice President - Customer Relations Tuesday, March 10, 1998, 9:00 A.M.
Long Beach Marriott
Marlyce A. Faldetta 4700 Airport Plaza Drive
Corporate Secretary Long Beach, California
33
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from SEC FORM 10K
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 3,673,000
<SECURITIES> 0
<RECEIVABLES> 4,533,000
<ALLOWANCES> 42,000
<INVENTORY> 3,402,000
<CURRENT-ASSETS> 14,240,000
<PP&E> 12,742,000
<DEPRECIATION> 5,898,000
<TOTAL-ASSETS> 21,137,000
<CURRENT-LIABILITIES> 7,025,000
<BONDS> 0
0
0
<COMMON> 750,000
<OTHER-SE> 842,000
<TOTAL-LIABILITY-AND-EQUITY> 21,137,000
<SALES> 76,465,000
<TOTAL-REVENUES> 76,465,000
<CGS> 73,176,000
<TOTAL-COSTS> 80,250,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,000
<INCOME-PRETAX> (3,821,000)
<INCOME-TAX> (1,509,000)
<INCOME-CONTINUING> (2,312,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,312,000)
<EPS-PRIMARY> (2.08)
<EPS-DILUTED> (2.08)
</TABLE>
